Tax Effects of DOMA Repeal

With the Supreme Court’s Windsor decision repealing a portion of the Defense of Marriage Act (DOMA), the IRS issued revenue ruling 2013-17.  Regardless of the state the couple lives in, same-sex couples who were legally married in a jurisdiction that recognizes same-sex marriages are married for federal tax purposes.  For our clients in Massachusetts, California, Connecticut, Maine, New Hampshire, Vermont, Rhode Island, and a few other states, the filing status for the IRS will be the same as the state filing status.  Will taxes be higher or lower?  That depends upon your individual circumstances.

While Section Three of DOMA was still in effect, employees in same-sex marriages had to pay taxes on their federal benefits, such as health insurance.  Often, employers shouldered the burden by ‘grossing-up’ the employee’s wages to cover the extra tax. With the repeal of DOMA’s Section Three,  the employee will no longer pay tax on those benefits, resulting in tax savings for the employee and potential wage savings for the employer.

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